On 20 January 2025, US President Donald Trump issued an executive order that promised to slash the so-called Green New Deal. To achieve this, the administration began to unwind former President Joe Biden’s flagship Inflation Reduction Act (IRA) 2022. The executive order immediately froze any funds designated by the IRA and promised further changes. This set the stage for a rollback of tax credits and subsidies that promoted clean energy and EVs.
Renewable tax credits run out and EV incentives hit the brakes
Renewable and zero-emissions energy will be impacted as the administration phases out investment tax credits (ITCs) and production tax credits (PTCs) by 2031. This will disincentivise the construction of new clean energy plants and the continued production of clean energy. While worrisome for the energy sector, this change has only brought forward the phase-out date for these tax credits by a year.
The changes also impact other elements of the energy ecosystem, such as tax credits for improving household energy efficiency or the residential adoption of clean energy. As part of Trump’s proposed “big, beautiful tax bill,” it is likely that tax credits for installing residential solar panels, insulation and heat pumps will be repealed.
The other big news around the IRA rollback relates to EVs. Despite his close relationship with one of the US’s most renowned EV producers, President Trump has proposed scrapping tax incentives worth $7,500 and $4,000 for purchasing new or used EVs respectively. Additionally, a tax credit of $40,000 for large commercial EVs is on the chopping block. This move threatens to stall the momentum of EV adoption, a critical component of many companies’ net-zero strategies.
Net-zero strategies across the board have been destabilised
Energy companies will need to reassess the timelines of their net-zero strategies. Those with renewable or zero-emission projects scheduled for completion by 2028 will see no reduction in their tax breaks. However, those with longer-term horizons will receive diminished tax credits every year, and the incentive programme will end a year earlier than expected.
Across the automotive sector, net-zero strategies are at serious risk. A lack of financial incentives for commercial and retail purchases of EVs means the industry could face a downturn in demand. EVs are often described as the future of automobiles, and many companies have invested significantly in them, so this kind of market pivot could be disastrous.
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By GlobalDataCompanies outside the energy and automotive industries will also face instability in their net-zero strategies. The electrification of operations and logistics is the cornerstone of net-zero plans for many companies, especially in heavy industry. Purchasing or self-generating renewable energy, such as solar or wind power, is also crucial to net-zero strategies across the board. Cutting tax credits in these areas will slash the cost-effectiveness of these strategies, forcing companies to re-evaluate both the timeline and content of their net-zero roadmaps.
Carbon capture and biofuels escaping the axe will not save net zero
In line with GlobalData’s expectations, the Trump administration’s proposed overhaul of the IRA has left tax credits for carbon capture technologies and biofuels alone. Carbon capture and storage has begun to be adopted by industries with large direct emissions, such as energy, industrials and basic materials. This is post-combustion capture, which captures and stores carbon immediately after it is released from exhaust pipes. GlobalData predicts that this form of capture will be widely available by the mid-2030s.
However, carbon capture directly from the atmosphere is inaccessible for most companies. According to GlobalData, the technology will not be widely available until at least 2050 and potentially even later. As a result, maintaining tax incentives for investment in CCS will fail to support companies’ shorter-term net-zero strategies.
Biofuels tax credits have also been spared from the cuts. Biofuels are a kind of renewable fuel derived from biomass such as plants and organic waste materials. In the US, biofuel production is economically vital to states such as Iowa and Nebraska, which have consistently voted for Trump since he first gained the Republican nomination. This political factor is likely why biofuels have been left alone in the IRA overhaul despite their green reputation. Unfortunately, biofuels, like CCS, are still a long way from being ubiquitous. Unlike EVs, which are already widely available across many parts of the world, the same cannot be said of biofuels, and this will not be the case until the late 2030s. Because of this, maintaining tax breaks for biofuels will not be the saving grace of companies whose net-zero strategies rely upon EVs.
